Arun, perhaps not on every turn, because there is always an element of luck, not to mention known unknowns, and unknown unknowns. I have never agreed with the random walk theory and that "You can't beat the market".
The fact is that plenty of people do beat the market.
However, I also subscribe to the "Monkeys Investing" theory. 1000 monkeys investing, picking "buy" or "sell" buttons will half the time pick the right button. So, after the first choice, 500 will be right. Keeping the winners and sacking the monkeys who were wrong, they try again and 250 will be right. Repeating the process, after the third attempt 125 will be right. After the 4th 62 will be right, 5th = 31, 6th = 16, 7th = 8, 8th = 4, 9th = 2, 10th = 1 and we have our champion. That monkey will be the cleverest guy on the block, swanking around in a Lexus convertible with all the girls.
Suppose they each start with $1000 and the stock doubles in price before the next attempt. The winner will have $1million and what a clever chap they'll all think he is. But next time, he might short Google or HOV. TJ was a loser monkey on both of those. In both instances, the market was wrong longer than he could stay solvent. In Google's case, the market is still wrong.
The problem is, how do you know if you are just a monkey or are actually better than the rest? TJ does look and act very like a monkey. If it walks like a monkey and quacks like a monkey, then it probably is a monkey. But not everyone is pure monkey. There is a processor designed for interpreting surroundings and making survivor decisions sitting behind the eyes peeking out to see what's going on. Some of them are better than others.
In the short run, the markets are a voting machine. Electorates are constantly voting for dopey things. So doing something different is often a good idea. Large numbers voting don't make them right, even if all the information is "in the market". Look at India for example. A billion dopey people voting to stay poor. Look at China = a billion dopey people voting to ... no, wait, they don't have a vote. They have "leaders" who keep them poor.
Mqurice |
